House of cards

The sensitive residential housing market will stabilize at a ‘frustratingly slow pace’ as home prices return to pre-boom levels.

If most of your landscape work was in residential design/build in Tempe, AZ, then “you’re probably out of business because it dried up.”

This from Brian Golembiewski, president of Tempe’s $2.95 million Paramount Landscape. And it’s just one example of an area where the housing market “tanked,” as Golembiewski puts it. Building is stagnant, home prices are devalued and there is a large inventory of homes available. “We’re near the bottom — it’s as bad as it can get,” he says.

The same is happening in Allentown, PA, where Joanne Kostecky Garden Design’s business manager Kirk Brown says: “The housing market is glutted with a residential inventory far in excess of anything remotely normal. Prices have taken a dive to 25% to 40% of pre-recession highs. Most real estate agents are bracing for what they see as a second round of foreclosures that will only add more depressed inventory available at fire sale prices.”

In Kingwood, TX, the outlook is a little brighter, but only in select price ranges. “The market is increasing in homes ranging from $150,000 to $200,000 and homes in the $1- to $2-million range,” explains Matt Griffin, president of Prime Lawn/Prime Design. U.S. Census figures concur with this — showing homes sold in the $150,000 to $300,000 range (where most first-time home buyers make their purchases) picked up share. “But in homes priced between $400,000 and $500,000, there’s not a lot of development at all.”

When it comes to buyers, 76% of consumers believe current home buying conditions are good — 65% citing low prices and 46% citing low interest rates as reasons why, according to the University of Michigan Consumer Sentiment Index. Though most consumers recognize the market offers some of the best housing affordability opportunities in a generation, that view is not reflected in actual home buying activity.

In most parts of the country, house prices have returned to what the National Association of Realtors loosely describes as “pre-boom levels.” For a new home, U.S. Census data says the median sales price is $204,000, down from $214,200 one year ago.

The National Association of Home Builders expects any additional price declines to be mild and temporary — the underlying trend is upward. “All of the bubbles have been removed” from price, Yun says, but the recovery will proceed at a “frustratingly slow pace.”

As contractors wait for housing market stabliziation, there is a bright spot in the area of home improvements, where spending was up 10.6% this year, according to the National Association of Home Builders.